Wednesday, July 9, 2014

Wage Growth and CPI Correlation

Above is a scatterplot comparing the year over year percentage change in seasonally adjusted average hourly earnings of "non-supervisory" employees and the Y/Y rate of change in CPI. Notice the positive correlation: when wages increase at a higher rate year over year, CPI is likely to follow.

Let's place the above data into a wage context:

Right now, the average hourly earnings of non-supervisory workers is low by historical standards, indicating that we can expect weaker pressure on prices from this data set.